Greece should quit euro 'temporarily': Ifo's Sinn

Cash-strapped Greece should be allowed to leave the euro zone temporarily, the president of Germany's influential Ifo Institute for Economic Research told CNBC on Thursday.

Talk that Greece is on the brink of a debt default that could trigger its exit from the euro zone has grown this week. A senior ruling party official said on Wednesday that Greece would be unable to make a payment to the International Monetary Fund on June 5 unless it received more aid from its creditors.

"Greece is insolvent… and we are delaying the process of declaring insolvency which would be illegal if it was a private company," Ifo's Hans Werner-Sinn told CNBC Europe's "Squawk Box."

"It is time for a big (debt) haircut and more radical measures to help Greece."

Sinn, who has spoken in favour of a Greek exit from the euro zone in the past, said it was difficult to see how Greece could resolve its problems while remaining in the single currency bloc, but added that any exit -- or "Grexit" -- did not have to be permanent.

"Isn't it better to have a more flexible euro where someone can leave temporarily and return later with a devalued currency, rather than trying to impose the devaluation internally?" he said. "This is a recipe for maximising unemployment and turmoil."

Slow progress

Talks between Greece's anti-austerity government, led by Prime Minister Alexis Tsipras, and its international creditors over unlocking 7.2 billion euros ($8 billion) of aid have been deadlocked on the subject of reforms.

"What is clear that is Greece is unlikely to be able to repay its debt and it's a question of some kind of rollover period, where interest payments continue to be reduced in a way that you can't recognise this as a default," Ashok Shah, investment director at London & Capital, told CNBC Thursday.